Right now, millions of people are going through the pain of foreclosure as the sub-prime mortgage crisis sweeps across the United States. As a result, those millions of people will learn first hand what can happen to their credit score when a foreclosure is put on it.
When a foreclosure happens, it means that the homeowner can no longer make payments on their loan. The property is then seized and sold. The owner of the property receives no money for this sale, and all the money goes to paying off the mortgage for the bank, with whatever is left over going to the bank. This will all happen after about six months of missed payments and a Notice of Default to the homeowner. After three months more of not paying, the sale date for the foreclosure is set and the house is up for sale due to foreclosure.
Everybody knows just how bad a bankruptcy can be for your credit score, but what about if you suffer a foreclosure? First, a foreclosure will stay on your credit report for seven years, while a bankruptcy will be on it for as much as ten years. In regards to your FICO score, it will plummet about 100 to 200 points. This means that if you have great credit at 700, you will most likely fall to about 500. However, if you had perfect credit of 850, you will fall to average credit of 650. It may seem that you can still get credit if your score is at 650 and the foreclosure may not be that bad, but it is. When you apply for credit, credit holders will see the big evil word ‘Foreclosure’ on your credit report. That means for the next few years, there will be no way you will get credit as many lenders will fear you could default on your loan to them, as you did with your mortgage loan.
Foreclosure is a very difficult situation to be in, but thankfully it is not the end of the world. As many people know, credit is ever changing and it is not set in stone. Therefore, over the seven years that you have to deal with a foreclosure on your credit report, you will be able to slowly repair your credit. To do this, you need to make sure you pay back your bills and credit card payments as you get them. You should slowly try and apply for credit as you go through the years, and you should even go to debt counselling as it will look good on your credit report.
Do not fear that everything is over when you go through a foreclosure. Millions of people have gone through the same thing and millions more will go through it as well. All you can do is dig your feet in, work hard to get through it and learn from the mistake of foreclosure and ensure it never happens to you again. Repairing your credit is at an all time importance and something that you can do yourself. Everything is determined by your credit score, so be alert, be prepare and fix your credit today.
Archive for ◊ June, 2010 ◊
What is the best way to get started in with foreclosures or other real estate. The best way to get involved with anything is the same – jump right in.
How do you jump in and not make a costly mistake?
Glad you asked. Jump in as if you are going to buy your first foreclosure whether it’s from an owner, a bank or even from the court house steps right up to the actual purchase.
After or during the time of reading and taking classes before your eventual entrance into the foreclosure market jump into the actual work involved with research. Research 50 to 100 properties.
One of the best teachers is finding answers to many questions. As you proceed you will be faced with a multitude of questions from where to find each type of foreclosure, how to arrange financing plus much more. Questions will drive you to ask specific questions. Who to ask? Ask the people involved in the process. For example, nose around at the public trustee’s office. You may never buy at the court house steps but you will learn some invaluable information.
Sift through the trustee’s books. Take an in-depth look at one or two really messy foreclosures – foreclosures with five or more liens. Look through each lien on the property and pay special attention to recorded dates and type of the liens. Pay attention to the date the lien was recorded and who holds the lien. Is it a first, second or third mortgage, an IRS lien or a mechanics lien?
There are different rules for different liens and different rules for redemption period of an IRS lien.
The benefits to all this work are apparent if you are going to deal in pre-foreclosure properties, dates and types of liens are important to closing the deal. If a property is two days from a public trustee sale you have little or no time left. If there is an IRS lien involved depending on the amount it could be a deal killer. Why waste time messing with a property that is impossible to work with. Also, you have learned an incredible amount about the foreclosure process which brings you one step closer to your first big deal.
One tool to have is a current copy of your State’s real estate laws. It’s a good start but not absolutely complete. Ask the people in the Trustee’s office, especially the ones that have work in the office for a long time. Many times they have invaluable information of how the process works. If you can make contact with a title company representative and see if they will teach you about liens or take a course on liens. If you want to, spend a couple of dollars go see a real estate or foreclosure attorney – not just any attorney but some one that specializes in foreclosures – ask them about your State’s laws.
Finally, go see two or three commercial bankers or lenders and ask what the bank’s requirements are for loaning on a pre-foreclosure etc. This will open your eyes wide and further teach you an invaluable lesson on foreclosures.
Jump in and if you find a lucrative property then you can proceed. If you are not sure or need more information then get more information or back off. In researching properties you will learn more and faster than you ever expected.
Good luck and go get ‘em.